The Rip-Off of a Nation

As we go to press, events in Russia are unfolding at an incredible speed. Daily newspapers -- let alone bimonthly magazines -- find it hard to keep pace with new developments in this, one of the worst crises Russia has faced in recent years. At press time, the Russian Duma had just rejected Yeltsin's candidate for prime minister, Viktor Chernomyrdin, a second time. By the time this issue is in readers' hands, all could be calm and Russia could have a functioning government. Or the Duma could be dissolved and Yeltsin and Chernomyrdin could be ruling by decree. No matter the results, average Russians must live through it. Which is why we asked Executive Editor Mikhail Ivanov to find out how Russia's long-suffering population is coping with the crisis.

“A ruble in the hand is better than two in a bank.”

A new piece of Russian folk wisdom.

Rescue operation at Sberbank

“Cash has arrived,” murmurs the crowd on line at the Prospekt Zhukova branch of a Moscow Sberbank, as they watch two armed, security officers empty out of an armored van with two sealed, great sacks. It turns out that one sack was full of dollars, the other newly-minted rubles.

Of course, there is not enough cash -- rubles or dollars -- for everyone. Sberbank employees begin playing games with customers, using cruel delaying tactics on less pushy clients.

“Did you order your money for withdrawal beforehand?” inquires the female head of the branch, in response to an angry client demanding his hard currency account be emptied.

“Yes, I did.”

“And when was that?”

“Yesterday.”

“Oh, well, then forget it,” chuckles the woman. “We have people waiting for a week by now to withdraw their money. Why don’t you come back tomorrow?”

“But I am the only one in line here who has a dollar account.”

“I said forget it!”

“OK,” the patron says, “if there are no dollars, give me my money back in rubles.”

“No,” the matron replies, “we have no right to do that.”

“Well, excuse me,” says the client, brandishing his contract with Sberbank, “But you have no right to refuse me my money upon my first request. So give me my rubles or sign a written refusal so that I can sue you.”

The argument sends a wave of agitation through the long line of clients. “Svolochi!,” [bastards] yells a man in his late 60s, who later identifies himself only as a veteran test pilot. “Yeltsin should be hanged and I only wonder how it is that no one has done it yet. I lost 20,000 old rubles because of this regime, the value of three cars in Soviet times, when meat cost two rubles a kilo. Now he is doing this to us again.

The Sberbank manager makes another desperate attempt to woo the customer into complacency. “Why don’t you wait until the dollars arrive? You will lose 20% on the transaction.”

“Yeah, sure, and when will those dollars arrive?! Give me my money now, or I’ll call the Central Bank Hot Line.”

The people waiting in line get even more nervous. Some are angry at the rich, “bourgeois” customer who has his account in foreign currency. Some are simply furious at Sberbank and seem ready to storm the counter.

Eventually, the manager gives in and she empties the client’s account, changing them into rubles at that day’s official rate. Even after transferring them into dollars at an exchange point and losing 20% of his savings to the exchange rate differential, he calls himself lucky. Most of those on line got only excuses from the bank today. Yet, interestingly enough, while the run on deposits demanded the attention of the bank’s manager, nearby Sberbank employees were successfully convincing babushkas to transfer their savings to other types of accounts, with higher interest rates.

How much flour does a man need?

By the second week in September, panic buying sparked by the ruble devaluation had reached almost pandemic proportions. For the first time since the early 1990s, there were long lines at shops and customers were hoarding goods -- from VCRs to matches and salt -- like there was not tomorrow. Retailers could not make payments, because banks were not operating. Importers could not pay foreign suppliers for the same reason. So imported foodstuffs and consumer goods disappeared from shelves almost overnight.

The younger generation was not buying salt. At the first stage of the crisis, many ran out to buy electronics which, if purchased in dollars, came at a real bargain. “Actually, the crisis has helped us,” smiled Lena Tkacheva, a 20-year-old shopper at Moscow’s Gorbushka electronics market. “I could not talk my husband into buying us a new refrigerator, but now he was the one to rush here.”

Lena’s husband Sasha wipes sweat from his brow as he leans into his huge new Korean Daewoo refrigerator. “If you are smart now is the time to make bargains. I paid just $600 for this fridge, which normally costs a thousand bucks. Ruble prices are still lagging behind the dollar rate. Now I’ll carry my old Zil [refrigerator] to the dacha and fill the huge Daewoo freezer compartment with salted mushrooms and lard, to make it through the winter."

Detergents, soap, shampoo and deodorants were other hot buys. Car drivers, hearing rumors of gasoline price hikes began filling gas cans while gas was selling at just R2.20/liter (about thirty cents a gallon). Yet, at a station on ulitsa Zorge, some showed some common sense. “Okay,” said Viktor Fedin, sitting on his ancient Lada-5, “I can fill up 10 cans and have about a ton of gas stored. But what if it explodes in the garage -- I will lose more than I can gain.”

Margarita Semina, history teacher from a Moscow secondary school spent her afternoon at a Moscow open air wholesale market. She came back with 10 sacks of flour, each weighing two kilos. “It makes no sense to sit on my rubles,” she said. “I make a million rubles a month -- this is now worth fifty dollars -- so it is better to spend this on flour. I can bake great pirozhki in winter; I have already stocked enough cabbage for the filling.”

Margarita is not alone. According to official reports, Muscovites were buying five times as much flour as usual. “What is the point of buying all that flour, which cannot be stored and which you will have to throw away anyway,” asked Vitaly Morozov, head of the city’s food department, at a press conference. True enough. Given the poor sanitary conditions of most Moscow apartment blocks, stockpiled flour will only feed “the mice and the worms.” But try to explain this to a shopper who has lived through wartime or Soviet food deficits.

City officials said that most food stuffs are in sufficient supply to last a month, but that food imports have dropped to very low levels. Foreign suppliers have stopped shipping products, worried that payments will never be made. And if nothing was getting in, nothing was going to get out. Moscow Mayor Yuri Luzhkov banned “illegal” deliveries of food out of Moscow.

The rich cry too

The head of credit card operations department at one of Russia's leading commercial banks, Sergei S., is one of the tens of thousands of bank employees who lost their jobs as a result of the crisis. Actually, Sergei felt the effects of the economic collapse in France, where he was vacationing in Nice. "All of a sudden, my VISA card, issued by my own department, was refused at a local casino when I was trying to cash in some francs. The next day, the same thing happened to me in a local restaurant. And I had zero dollars in cash on me. So we had to save up food for lunch from the morning breakfast buffet, since our tour package included only dinner and breakfast.”

Before his vacation in France, Sergei, banking on a promised promotion and salary hike, had borrowed money from friends to buy a new BMW for his wife. Now he has neither a job nor money to repay his debts. “I'd better start trying to sell it right now,” he said. “Having a foreign car without a solid job in Russia is an unaffordable luxury.”

The same goes for shopping at Moscow’s expensive boutiques in the new Manezh shopping center. These days they are all empty. Sveta V., a store assistant at an Italian boutique is yawning. No customers are putting out $400 for shirts today. The only people popping in to the upscale Manezh shopping center were hiding from September’s rainy weather.

Of course, every disaster is relative. And the “New Russians” are surely not those deserving of first sympathies. Most had time enough to invest money abroad or in real estate.

Still, parting with wealth proved difficult for some, like the hysterical young Russian with crude manners who was shown on TV, begging those in a long line at a Moscow exchange point to sell him dollars, his pockets full of rubles. “Help me out, bratki [brothers], I am in trouble.”

In a similar vein, the press reported the case of the son of Kursk governor Alexander Rutskoi, who was caught trying to smuggle a large, undeclared sum in dollars cash through customs as he was flying from Sheremetevo-2 to Frankfurt. Customs officers detected the cash and father Rutskoi reportedly flew to Moscow to rescue his hapless progeny.

“I wish I had their problems,” said Anna Katusheva, a woman in her late fifties who lives in suburb near Voronezh. “I have nothing to lose,” she declared while working on her garden plot. “I have been struggling for years to make ends meet, so I am glad not to have to rush to buy the zelyonye (greenback). Katusheva says she's got a much better type of zelyonye -- the cucumbers, green onions and parsley from her plot, which she is going to sell this fall and winter at a Voronezh market. “These are my savings in zelyonye,” she said, showing off her gardens. People at a more advanced age think of different safe havens for their rubles -- a babushka from the town of Trublach converted all her savings into a headstone set on her future grave. The date is left open on the headstone. Now she is happy, she said, she has no inflation jitters.

“Who lives well in Russia?”

Answering this eternal question, posed by Nikolai Nekrasov in his poem of the same name, is difficult. The shortest answer is, of course, no one. Public sector employees, army and security officers, teachers, doctors and, of course, pensioners, i.e. all those paid in rubles (and paid late at that), now all live well below the poverty line. They have basically been abandoned to starve.

And yet, they are not the only ones hard hit. All types of businesses have suffered in the crisis. The collapse of the banking system left 20,000 bank employees jobless in Moscow alone. Demand for office space in the capital has dried up and experts are predicting a minimum 30% drop in prices, hurting developers, landlords and real estate agents alike. Insurance companies are all hurting because they had put the lion’s share of their assets in government treasury bills that turned out to be worthless -- so one cannot expect to get anything from an insurance claim. The stock market is dead, so stock brokers are jobless. Recruiters note a drop in demand for once-lucrative professions like sales managers. Travel companies expect a precipitous drop off of interest in foreign travel -- no one has the extra cash and the travel companies cannot pay foreign tour operators because the banks are paralyzed. Advertisers are cutting their budgets, which hits the media. And on and on.

Beer amidst the plague

Actually, it is easier to enumerate those who could profit by the crisis. In the first place, there are the Russian oligarchs, their hold on the country’s natural resources, media and levers of power is seemingly so secure that even this crisis can only be weaken them slightly. Then there are the lawmakers, who have used the economic crisis to squeeze as much political capital from the weakened executive as possible. So much for rallying around the flag.

Demand for lawyers is up as customers and companies prepare to sue each other for things neither had any control over. Domestic oilmen may be in an advantageous position -- they can reduce their costs by paying in inflated rubles while world oil prices recover (traders apparently feared a disruption in Russian oil supplies). Cigarette producers prove that people will pay almost any price to keep their habit -- cigarette prices climbed 100% in the very first days of the crisis.

In the same vein, domestic vodka producers may come out better. The devaluation of the ruble has forced bootleggers from the North Caucasus to nearly double their prices (they buy their spirits abroad, for dollars, while legal alcohol producers are buying their spirit at home, for rubles). This has narrowed the gap considerably between prices for real and fake vodka, which might encourage consumers to buy only the legal stuff, thus helping domestic producers of this alternative currency.

Domestic brewers also saw some benefit. As prices for imported beer skyrocketed -- while the cheapest Czech beer sold for R10 in mid-September, domestic beer stayed stable at some R5-R6 and demand for it was steadily growing. In fact, early in the crisis, beer lovers got together at Moscow's Hermitage Garden for a long-planned beer festival. The festival, alluding to Pushkin’s poetic phrase, was appropriately nicknamed Pivo vo vremya chumy -- beer amidst the plague.

The New Argentineans

So is the crisis is irreparable? Ought we cite another Kirienko, the poet Maximilian Kirienko-Voloshin, who, soon after the Bolsheviks came to power 80 years ago, declared with resignation “we’re done with Russia -- we talked it through.”

The situation in Russia leaves little room for optimism. In the very best-case scenario, the country is thrust back to the early 1990s, with hyperinflation unleashed, the population angry as ever and the fledgling new rich and even the middle class finding little incentive to work hard and be entrepreneurial -- it turns out that a mattress full of greenbacks is still the only safe deposit.

One may, of course, cite the quote that “each people gets the rulers it deserves,” but, frankly, after all the suffering Russians have been through, this sounds too cynical.

So, time and again, Russia's ray of hope is her people, their wit, patience and humor... That they still preserved this vital character trait was shown in a recent “man on the street” poll in Moscow. “Do you trust Russian banks?” the correspondent asked. One clever interviewee responded, “Yes, I do trust our banki, especially if these are banki of coffee [in Russian, banki can mean “banks” or “cans”].

When, on top of all the economic calamities and amid talk of an “Argentinean solution” to Russia’s problems [invoking strict monetary control], Russians saw their national soccer team humiliated by the Ukrainians 3:2, in Russia's first Euro-2000 qualification match in Kiev. The usually skeptical Komsomolskaya Pravda declared, “let’s go for the Argentine plan! Maybe our soccer players will play as well as the Argentineans?”

And then there is the new television commercial advertising the first Russian edition of Vogue magazine: “In Russia ... at last.” This prompted a sarcastic retort from Russian journalist Leonid Bershidsky: “Finally, I know what the missing element was in our hilarious version of reality: Vogue!”

People who keep their sense of humor, despite all the tricks their rulers are playing on them, definitely deserve a better fate than a president lying to the electorate, a paranoid State Duma overtly inciting the electorate to unrest, or a Central Bank ripping off bank customers. But even the long-suffering Russian people’s patience and sense of humor should not be taken for granted. For when the money reserves dry up and the shops begin to hearken to late-Soviet consumerism, Russians may switch their attention from shopping sprees to something less innocuous -- like erecting barricades. And if the austere Argentinean economic scenario is the only solution, Russia’s rulers will have to earn some trust from their subjects, and prove that they are ready to tighten their belts too. After all, it takes two to dance the Argentinean tango. Especially if the dancing floor is an immense country like Russia.